<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A AMENDMENT NO. 1
THE REGISTRANT HEREBY AMENDS THE INFORMATION SET FORTH UNDER ITEMS 10, 11, 12
AND 13 IN THEIR ENTIRETY.
- --------------------------------------------------------------------------------
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM __________TO __________
COMMISSION FILE NO. 0-11851
CHAMPION HEALTHCARE CORPORATION
- --------------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 59-2283872
- ------------------------------- ----------------------------------
(STATE OF INCORPORATION) (IRS EMPLOYER IDENTIFICATION NO.)
515 W. GREENS ROAD, SUITE 800, HOUSTON, TEXAS 77067
- ---------------------------------------------------- ---------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
14340 TORREY CHASE, SUITE 320, HOUSTON, TEXAS, 77014
- ----------------------------------------------------
(FORMER ADDRESS)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 873-6623
---------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
COMMON STOCK, $.01 PAR VALUE AMERICAN STOCK EXCHANGE
- ---------------------------- -------------------------------------------
(TITLE OF CLASS) (NAME OF EACH EXCHANGE ON WHICH REGISTERED)
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS TO BE
FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE
PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO
--- ---
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405
OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO
THIS FORM 10-K. [ ]
THE AGGREGATE MARKET VALUE OF VOTING STOCK HELD BY NON-AFFILIATES OF THE
REGISTRANT BASED ON THE LAST REPORTED SALES PRICE ON MARCH 25, 1996, IS
APPROXIMATELY $46,918,000.
THE NUMBER OF SHARES OUTSTANDING OF THE REGISTRANT'S COMMON STOCK, $0.01 PAR
VALUE, AS OF MARCH 25, 1996: 11,963,366 SHARES.
DOCUMENTS INCORPORATED BY REFERENCE
NONE
<PAGE> 2
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Each director holds office until the next annual meeting of stockholders and
until his successor is elected and qualified. Set forth below are the names,
ages and certain other information concerning the directors of Champion
Healthcare Corporation (the "Company") as of April 8, 1996. See "ITEM 1A.
EXECUTIVE OFFICERS OF THE REGISTRANT" contained in PART I of the Company's Form
10-K filed on April 1, 1996, for information regarding Charles R. Miller, James
G. VanDevender and other executive officers of the Company. Messrs. Miller and
VanDevender have each been a director of the Company since 1990.
NOLAN LEHMANN (Age 51, Director since 1991)
President of Equus Capital Management Corp., an investment advisor firm located
in Houston, Texas, since 1983. Mr. Lehmann also serves as President and a
director of Equus II Incorporated, a registered investment company traded on
the American Stock Exchange; Allied Waste Industries, Inc., which deals with
solid waste; Drypers Corporation, which manufactures disposable baby diapers.
Both Allied Waste Industries, Inc. and Drypers Corporation are traded on
NASDAQ. Mr. Lehmann holds graduate and undergraduate degrees in accounting and
economics from Rice University and is a Certified Public Accountant.
JANET A. HICKEY (Age 51, Director since 1995)
Since 1985, Ms. Hickey has been both a general partner of the Sprout Group, the
venture capital affiliate of Donaldson, Lufkin and Jenrette ("DLJ"), a major
investment banking firm, and a Senior Vice President of DLJ. Sprout Group
manages over $750 million in private equity partnerships. From 1970 to 1985,
Ms. Hickey was with General Electric Investment Corp. where she served as
Senior Vice President of Venture Investments, and as a Trustee of the General
Electric Pension Trust. She currently is a director of Corporate Express,
Loehmann's and other private companies. Ms. Hickey was formerly a director of
the National Venture Capital Association.
JAMES A. CONROY (Age 35, Director since 1992)
Mr. Conroy has been a general partner of OGP Partners, L. P., the general
partner of The Olympus Private Placement Fund, L.P., since 1990. Olympus
invests in the growing domestic and international private placement markets
through purchases of equity and mezzanine securities and manages capital for
U.S. American Residential Holding Corporation. From 1988 through 1990, Mr.
Conroy was employed by Bain & Co., Inc. Mr. Conroy received his BBA degree
from the University of Virginia and a MBA from Dartmouth's Amos Tuck School of
Business.
DAVID S. SPENCER (Age 55, Director since 1992)
Mr. Spencer has over 26 years experience as a health care executive. He is
founder and Chief Executive Officer of Management Prescriptives, Inc. ("MPI"),
an education and information services company specializing in improving the
quality of care and financial performance in hospitals through a systematic
program for identifying and eliminating adverse patient events. Prior to
founding MPI in 1988, Mr. Spencer was President of Voluntary Hospitals of
America Management Services from 1982-1988. Before that, he was President and
Chief Executive Officer of Hospital Affiliates Management Corporation, which as
responsible for the contract management of 129 hospitals in 39 states. He also
served on the faculty of Vanderbilt University and is a former member of the
Board of Directors of Tulane University Medical Center. Mr. Spencer received a
BS in Economics from the University of Illinois and a Masters Degree in Health
Care Administration from the University of Minnesota.
1
<PAGE> 3
MANUEL M. FERRIS (Age 62, Director since 1992)
Mr. Ferris has been President and Chief Executive Officer of the Harvard
Community Health Plan, a health maintenance organization, since 1991. Mr.
Ferris was the Westin Hotels Distinguished Professor at Washington State
University from 1990 until 1991. During 1986 through 1989, Mr. Ferris pursued
a number of personal interests. Prior to 1986, Mr. Ferris served for almost
30 years in senior executive positions with the Sonesta, Sheraton and Howard
Johnson hotel corporations. He served as President of the North American
Division of Sheraton Hotels and President of the Accommodation Group for the
Howard Johnson hotel chain. Mr. Ferris received Bachelor's and Master's
degrees in Education from Boston University.
WILLIAM G. WHITE (Age 56, Director since 1994)
Prior to the Company's merger with AmeriHealth Inc. in December 1994, Mr. White
had served as Chairman of the Board, President and Chief Executive Officer of
AmeriHealth since June 1983, and he also served as Chief Financial Officer of
AmeriHealth from February 1991 to September 1991. Mr. White received his BBA
degree from Delta State University and has participated in post-graduate level
courses at both Indiana University and Ohio State University.
RICHARD D. SAGE (Age 55, Director since 1994)
Prior to the Company's merger with AmeriHealth Inc. in December 1994, Mr. Sage
had served as Vice Chairman of the Board and Executive Vice President of
AmeriHealth from June 1983 until October 1985. He also served as Treasurer of
AmeriHealth from April 1983 to October 1985. Mr. Sage served from June 1988 to
June 1993 as a Vice President and Regional Vice President of HHL Financial
Services Company, which specializes in the collection of health care accounts
receivable. Since June 1993 he has been associated with Sage Law Offices in
Miami, Florida. Mr. Sage has a Bachelor's degree from the University of Miami
and a J.D. degree from New York Law School.
ARRANGEMENTS WITH RESPECT TO THE ELECTION OF DIRECTORS:
D STOCKHOLDERS AGREEMENT
Effective December 31, 1993, the Company, the holders of the then outstanding
Common Stock and all classes of the Company's Preferred Stock executed the D
Stockholders Agreement, as amended, (the "D Agreement") in connection with the
sale of approximately $90 million in Series D Preferred Stock and 11% Senior
Subordinated Notes (the "Series D Notes") pursuant to the Series D Note and
Stock Purchase Agreement (the "Purchase Agreement") executed on the same date.
The D Agreement contains a voting agreement, restrictions on transfer of
certain stock, and limited preemptive rights to future Common Stock issues or
sales.
The D Agreement provides certain shareholders and shareholder groups with Board
nominee designation rights for eight Board positions and requires all parties
to vote for such nominees. The schedule below reflects the incumbent director
nominated by each of these shareholders and shareholder groups and the current
amount of indebtedness owed by the Company to each shareholder or group
thereof.
2
<PAGE> 4
<TABLE>
<CAPTION>
INDEBTEDNESS OWED
TO
CURRENT DIRECTOR SHAREHOLDER OR
STOCKHOLDER OR GROUP REPRESENTATIVE GROUP(1)
- ------------------------------------------------------------------------------------
<S> <C> <C>
Former holders of Series BB Preferred Manuel M. Ferris $ 11,042,000
Stock (such shares converted into
Common Stock as part of the 1995
Recapitalization Agreement) and
holders of Series C Preferred
Stock, as a Group(2)
Frontenac VI Limited Partnership; Vacant $ 10,000,000
Frontenac Diversified III Limited
Partnership(3)
Olympus Private Placement Fund, L.P.(4) James A. Conroy $ 1,500,000
Equus(5) Nolan Lehmann $ 1,500,000
Sprout(6) Janet A. Hickey $ 4,434,000
Charles R. Miller, James G. Charles R. Miller --
VanDevender(7) James G. VanDevender
David S. Spencer
</TABLE>
- ------------------------------
1. Principal amount outstanding of Series D Notes.
2. The right exists so long as the holders collectively of Series C Preferred
Stock and the former holders of Series BB Preferred Stock, which converted
into Common Stock as part of the Company's 1995 Recapitalization Agreement
("Converted Series BB"), hold one-third of the Proforma Conversion Stock
(Common Stock issuable upon the exercise of all classes of outstanding
preferred stock and warrants), as defined in the D Agreement, initially
purchased by them, provided the nominee is not an Affiliate of any
Converted Series BB or Series C stockholder, and the nominee is approved
in writing by a majority of the directors who are also the Company's
senior management. Olympus Private Placement Fund, L.P., owns some Series
C; Equus and Sprout also own some Converted Series BB and C; and Frontenac
owns some Series C.
3. The right exists so long as these two holders of Series D Preferred Stock
hold at least one-third of the stock initially purchased by them, provided
the nominee is a general partner in Frontenac Company.
4. Olympus must hold at least one-third of the Common Equivalent Stock
(outstanding Common Stock and Common Stock issuable upon the exercise of
all classes of outstanding preferred stock and warrants), as defined in
the D Agreement, held by Olympus on December 31, 1993, to maintain this
nomination right. If Olympus no longer owns one-third of the Common
Equivalent Stock it owned on December 31, 1993, then the holders of the C
Preferred Stock and the Converted Series BB Preferred Stock exercise the
same right, voting together as a class by a two-third vote, so long as the
Series C stockholders and the Converted Series BB stockholders own
one-third of the Proforma Conversion Stock purchased by them pursuant to
the Purchase Agreement.
5. Equus Capital Partners and Equus II Incorporated ("Equus"). The right
also exists so long as Equus is the holder of one-third of the Common
Equivalent Stock held by it on December 31, 1993, or purchased pursuant to
the Purchase Agreement.
6. Sprout Growth, L.P., Sprout Capital, VI L.P., DLJ Venture Capital Fund II,
L.P., DLJ Capital Corporation, Sprout Growth II L.P. (collectively,
"Sprout"). The right exists so long as Sprout is the holder of one-third
of the Common Equivalent Stock held by it on December 31, 1993, as
purchased pursuant to the Purchase Agreement. Other affiliates of Sprout
are also owed amounts of such indebtedness.
3
<PAGE> 5
7. The right exists so long as Messrs. Miller and VanDevender are holders of
at least 50% of the Common Equivalent Stock held by them on December 31,
1993, for the nomination of two directors; and for the nomination of one
director subject to the written approval of Equus and Olympus, provided
that if Messrs. Miller and VanDevender do not continue to hold at least
50% of the Common Equivalent Stock held on December 31, 1993, and Mr.
Miller ceases to devote full time efforts to the Company, this nomination
right for one director becomes the joint right of Equus and Olympus,
collectively, provided they still hold at least one-third of the Common
Equivalent Stock held by them on December 31, 1993.
The voting agreement within the D Agreement requires the parties to vote their
shares for the election of the nominees made by the shareholders listed above,
subject to the conditions stated in the D Agreement. The voting agreement will
terminate no later than June 1, 2000 unless extended by mutual agreement of the
stockholder parties at the time of the extension agreement holding not less
than a majority of the Common Equivalent Stock.
Messrs. Miller, VanDevender, Patterson and Brooks (the "Restricted
Stockholders") are restricted in the sale of their stock to third parties by
the D Agreement so that the Company first and the other stockholders second
have the right to purchase the Restricted Stockholders' shares offered to a
third party. Mr. Miller has stock transfer restrictions prior to the second
anniversary of the closing date of a public offering by the Company of at least
$15,000,000. If parties to the D Agreement holding 75% of the Common
Equivalent Stock ("Selling Group") agree to sell such stock to a non- affiliate
of any member of the Selling Group in a bona fide third party transaction then
if (a) such sale is before December 31, 1996, and the price per Common
Equivalent Share is at least $28.00 per share of Series D Preferred Stock (if
before December 31, 1996) or (b) such sale is after December 31, 1996, and
regardless of the price, the Selling Group shall have the option to acquire or
require the buyer to purchase, all other Common Equivalent Stock held by the
non-Selling Group parties to the D Agreement. If such option by the Selling
Group is not exercised or is unavailable to be exercised, then the non-Selling
Group parties shall have the right to require the Selling Group to purchase
their Common Equivalent Stock at the price at which the Selling Group has
agreed to sell.
All parties to the D Agreement have a limited preemptive right to purchase
shares issued by the Company. This limited preemptive right does not apply to
certain exempted transactions, to public offerings, and to mergers,
acquisitions, or similar transactions.
The Purchase Agreement provides that holders of Series D Preferred Stock with
an aggregate stated value of $2,000,000, holders of an aggregate amount of not
less than $5,000,000 of Series D Notes issued under the Purchase Agreement,
holders of an aggregate amount of not less than $5,000,000 of Series E 11%
Senior Subordinated Notes issued under the Series E Note Purchase Agreement ("E
Agreement") and holders of warrants issued under the Purchase Agreement and the
E Agreement which if exercised would result in proceeds to the Company of
$2,000,000, shall have the right to attend Board meetings and receive
information sent to the Board members.
RESTATED CERTIFICATE OF INCORPORATION
The holders of the Company's Preferred Stock have the right to elect six new
members to the Board of Directors if the existing number of directors is eleven
or less, and one additional director for each director that exceeds eleven at
the time of a "Default Event" as defined in the Restated Certificate of
Incorporation. As of December 31, 1995, there were nine members on the Board
of Directors.
One of the Default Events set forth in the Restated Certificate of
Incorporation is a "Change in Control Event", as defined. A Change in Control
Event occurs when (1) the acquisition by one person or group of 50% or more of
the combined voting power of the then outstanding voting securities; (2) the
sale or disposition of all or substantially all of the Company's assets; (3)
the merger of the Company with or into another person; (4) any attempts by the
Company to reduce substantially or eliminate a public market for the Company
stock, to require a filing under Section 13(e) of the Exchange Act, or to cause
the delisting of the Common Stock from a national securities exchange; (5) the
material or complete liquidation of the Company.
4
<PAGE> 6
Other Default Events that trigger the rights of the Company's Preferred Stock
to elect a majority of the Board of Directors include: failure of the Company
to redeem the Preferred Stock as required; any payment default under any
material indebtedness of the Company; any acceleration of any such
indebtedness; any breach by the Company of covenants in the notes issued
pursuant to the Note and Stock Purchase Agreement dated May 27, 1992; an Event
of Default in the Company's Amended and Restated Loan Agreement dated May 31,
1995; any breach of covenants in the Series D Note and Stock Purchase Agreement
dated December 31, 1993; and any insolvency or bankruptcy proceedings.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
During the year ended December 31, 1995, Messrs. Wilkey and Starling, and Ms.
Miskin, upon their election as officers of the Company, did not file on a
timely basis Form 3 "Initial Statement of Beneficial Ownership of Securities."
Additionally, Messrs. Patterson and Luccasen did not file on a timely basis
Form 4 "Statement of Changes in Beneficial Ownership" in connection with shares
received in 1995 pursuant to the Company's acquisition of Psychiatric
Healthcare Corporation. The receipt of such shares was subsequently reported
on Form 5 "Annual Statement of Changes in Beneficial Ownership, " which was
filed on a timely basis. Based on a review of the reports required by Section
16(a) and furnished to the Company, the Company has determined that no other
persons failed to file reports on a timely basis.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by the Company to its
Chief Executive Officer and the next four most highly compensated officers
whose compensation exceeded $100,000 during the year ended December 31, 1995:
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION (1) AWARDS (2)
------------------------------------------ ------------
SECURITIES
UNDERLYING
NAME AND PRINCIPAL OPTIONS/ ALL OTHER
POSITION YEAR SALARY ($)(3) BONUS ($) SARS (#) COMPENSATION
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Charles R. Miller 1995 $ 437,500 $ 225,000 -- $ --
Chairman of the Board, 1994 $ 295,000 $ -- 13,876 $ --
President & CEO 1993 $ 234,167 $ -- -- $ --
James G. VanDevender 1995 $ 295,000 $ 162,500 -- $ --
Executive Vice President 1994 $ 235,417 $ -- 128,000 $ --
& Chief Financial Officer 1993 $ 181,667 $ 100,000 -- $ --
Ronald R. Patterson 1995 $ 295,000 $ 150,000 -- $ 2,310
Executive Vice President 1994 $ 235,000 $ -- 150,690 $ 2,250
& Chief Operating Officer 1993 $ 176,007 $ -- -- $ 76,782(4)
W. Warren Wilkey 1995 $ 190,568 $ 110,530 20,000 $ --
Senior Vice President -
Market Operations
Arthur M. Doloresco 1995 $ 185,000 $ 40,700 20,000 $ 57,768(4)
Vice President - 1994(5) $ 131,000 $ 117,500 13,150 $ 1,920
Operations 1993(5) $ 119,839 $ 75,000 8,766 $ 1,800
</TABLE>
- ---------------
(1) The column for Other Annual Compensation provided in the SEC's
standard summary compensation table is omitted because no such
benefits or other compensation were provided.
5
<PAGE> 7
(2) The Company did not award restricted stock or stock appreciation
rights ("SARs") during fiscal years 1993 through 1995, nor did it make
any payouts pursuant to long-term incentive plans during such period.
Accordingly, the columns for such items provided in the SEC's standard
summary compensation table have been omitted.
(3) Does not include amounts attributable to group life, health or
relocation plans that are non-discriminatory in scope, terms or
operation and are available generally to all salaried employees. Does
not include premiums for a long term disability plan available
generally to all management personnel.
(4) Includes $76,782 and $55,301 paid to Messrs. Patterson and Doloresco,
respectively, as reimbursement of relocation expenses.
(5) Amounts paid in 1993 and substantially all amounts paid in 1994 were
by AmeriHealth, Inc. ("AHI") prior to the reverse acquisition by the
Company through its merger with AHI on December 6, 1994.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
This table provides information on stock options granted in 1995 to the named
executive officers of the Company. The Company has never granted any SARs, and
the exercise prices on stock options previously granted were not amended or
adjusted.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------------- POTENTIAL REALIZED
VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF
SECURITIES OPTIONS/SARS EXERCISE STOCK PRICE
UNDERLYING GRANTED TO OR BASE APPRECIATION(2)
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION ---------------------
NAME GRANTED (#) 1995 ($/SH.) DATE 5%($) 10%($)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
W. Warren Wilkey 20,000(1) 12.6% $ 9.00 Jan. 16, 2005 $ 113,201 $ 286,874
Arthur M. Doloresco 20,000(1) 12.6% $ 9.00 Jan. 16, 2005 $ 113,201 $ 286,874
</TABLE>
- ---------------
(1) One third of the options vest each year beginning one year after
the date of grant.
(2) For a ten-year term, a 5% annual rate of appreciation equals total
appreciation of 63% (or $5.66/share based upon an exercise price of
$9.00/share), and 10% annual rate of appreciation equals total
appreciation of 159% (or $14.34/share based upon an exercise price
of $9.00/share). These potential realizable values are based
solely upon arbitrarily assumed rates of appreciation required by
applicable SEC regulations and are not intended to forecast
possible future appreciation, if any, of the market price of the
Common Stock.
6
<PAGE> 8
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
This table provides information with respect to the named executive officers
concerning unexercised options at December 31, 1995. The Company has never
issued any SARs, and none of the named executive officers exercised any stock
options during 1995.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE MONEY
OPTIONS/SARS AT FY-END OPTIONS/SARS AT FY-END ($)(1)
NAME (#) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Charles R. Miller 202,625 / 9,251 $ 505,125 / 0
James G. VanDevender 264,667 / 85,333 $ 402,375 / 0
Ronald R. Patterson 170,230 / 100,460 $ 105,000 / 0
W. Warren Wilkey 6,666 / 13,334 $ 0 / 0
Arthur M. Doloresco 38,225 / 13,334 $ 43,969 / 0
</TABLE>
- ---------------
(1) Based upon a closing stock price of $5.3125 as of December 29, 1995.
LONG-TERM INCENTIVE PLAN AWARDS/PENSION PLANS
The Company has no long-term incentive plans other than its stock option plans,
and the Company has no pension plan. Accordingly, disclosure regarding such
matters is not applicable.
COMPENSATION OF DIRECTORS
In February 1996, the Board of Directors authorized fees to outside directors
of $2,500 per meeting with total fees paid during any calendar year not to
exceed $10,000. Currently, Messrs. Ferris, Spencer, White and Sage are
eligible for such compensation. Prior to February 1996, the Company did not
compensate directors but did reimburse their out of pocket expenses for
attending board meetings.
In 1992, the Company adopted a Directors Stock Option Plan whereby certain
"non-management" directors would yearly receive options to purchase 10,000
shares of Common Stock, up to a maximum of 30,000 shares. Messrs. Spencer and
Ferris were the only directors eligible to participate in this plan, and each
has received options to acquire 30,000 shares of Common Stock at an exercise
price $9.00 per share. The options expire December 9, 2002.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Board of Directors has an Option and Compensation Committee
composed of David S. Spencer, Manual M. Ferris and James A. Conroy. None of
such persons is or has ever been an officer of the Company or any of its
subsidiaries. Mr. Spencer is a majority stockholder in a company that provides
services to the Company. See "Item 13. Certain Relationships and Related
Transactions."
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AGREEMENTS
Charles R. Miller and James G. VanDevender executed five year employment
agreements dated August 4, 1995. The agreements provide for an initial annual
salary of $450,000 for Mr. Miller and $300,000 for Mr. VanDevender. The annual
salary paid to each of the executives will be reviewed annually by the Board of
Directors and may be
7
<PAGE> 9
increased at the Board's discretion. Under the terms of the agreement, Messrs.
Miller and VanDevender agreed under certain conditions not to compete with the
Company for one year following a termination of employment. These agreements
contain provisions that Messrs. Miller or VanDevender may terminate their
employment (i) within six months of a Change in Control for any reason and (ii)
within eighteen months of a Change of Control and not more than six months
after (a) the failure to appoint each to their respective current officer
positions, (b) any material change resulting in a reduction in their authority,
duties, or responsibilities, or (c) any breach of any other provision of their
agreement including a reduction in salary. Upon any such termination, Messrs.
Miller and VanDevender are entitled to receive 2.99 times their current
annualized salary. A "Change in Control" is defined generally to mean the
acquisition by any person or group of sufficient voting power to elect a
majority of the Board of Directors.
Ronald R. Patterson executed a three year employment agreement dated August 4,
1995. The agreement provides for an initial annual salary of $300,000 per
year, which will be reviewed annually by the Board of Directors and may be
increased at the Board's Discretion. Under the terms of this agreement, Mr.
Patterson agreed that under certain conditions he would not compete with the
Company for one year following a termination of employment. Mr. Patterson's
agreement contains provisions similar to Messrs. Miller and VanDevender
relating to his ability to terminate his employment following a Change in
Control and upon such termination he would be entitled to receive two years of
salary at the then current annualized rate.
8
<PAGE> 10
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of April 8, 1996, certain information
regarding beneficial ownership of Common Stock by (a) each person known by the
Company to own beneficially more than 5% of each class of voting securities,
(b) each director of the Company, (c) the chief executive officer and the four
most highly compensated executive officers of the Company, and (d) all
directors and officers as a group. The information in the table was obtained
from information supplied to the Company by the beneficial owners listed below,
and where applicable, the books and records of the Company. Each party listed
below has sole voting and investment powers except as noted.
<TABLE>
<CAPTION>
COMMON STOCK CONVERTIBLE PREFERRED STOCK
--------------------------- FULLY
FOOTNOTE (e) DILUTED
SHAREHOLDER REFERENCES OWNERSHIP SERIES C SERIES D OWNERSHIP
----------- ---------- --------- -------- -------- ---------
(a)(f) (b) (c) (d)
---------------------------------------------------------------------------------------------
MANAGEMENT
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Charles R. Miller (1),(2),(22) 734,400 734,400
6.0% 3.40%
James G. (1),(2),(23) 407,333 407,333
VanDevender 3.28% 1.89%
Nolan Lehmann (2),(5),(8), 1,603,323 4,901 83,333 1,603,323
(28),(37) 13.10% 1.09% 3.86% 7.42%
Janet A. Hickey (2),(4),(7),(30), 2,786,901 33,616 279,985 2,786,901
(g),(h) 21.65% 7.49% 12.97% 12.90%
James A. Conroy (2),(3),(6),(31), 2,077,292 103,773 83,334 2,077,292
(g),(h) 16.47% 23.12% 3.86% 9.62%
David S. Spencer (2),(9),(41) 39,400 39,400
(*) (*)
Manuel M. Ferris (2),(25) 40,000 40,000
(*) (*)
William G. White (2),(24),(38) 249,318 249,318
2.06% 1.15%
Richard D. Sage (2),(36),(59) 111,435 111,435
(*) (*)
Ronald R. Patterson (1),(57) 231,531 1,847 231,531
1.89% (*) 1.07%
Warren W. Wilkey (1),(58) 8,666 8,666
(*) (*)
Arthur M. Doloresco (1), (26) 38,225 38,225
(*) (*)
All officers and (1),(27) 8,618,814 142,290 472,965 8,618,814
directors as a group 57.72% 31.70% 21.90% 39.90%
(25 persons)
</TABLE>
9
<PAGE> 11
<TABLE>
<CAPTION>
COMMON STOCK CONVERTIBLE PREFERRED STOCK
--------------------------- FULLY
FOOTNOTE (e) DILUTED
SHAREHOLDER REFERENCES OWNERSHIP SERIES C SERIES D OWNERSHIP
----------- ---------- --------- -------- -------- ---------
(a)(f) (b) (c) (d)
---------------------------------------------------------------------------------------------
NON-MANAGEMENT
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Bahrain International (17),(20) 445,443 111,111 445,443
Bank, E.C. 3.60% 5.15% 2.06%
Baker Fentress (21),(32) 535,443 111,111 535,443
& Company 4.29% 5.15% 2.48%
William Blair (16),(35) 793,644 30,675 83,334 793,644
Venture Partners III (g),(h) 6.44% 6.83% 3.86% 3.67%
Limited Partnership
+ William Blair (16),(35) 793,644 30,675 83,334 793,644
Venture Mgmt (g),(h) 6.44% 6.83% 3.86% 3.67%
Company
+ Samuel B. Guren (16),(35) 793,644 30,675 83,334 793,644
(g),(h) 6.44% 6.83% 3.86% 3.67%
+ William Blair (16),(35) 793,644 30,675 83,334 793,644
& Company (g),(h) 6.44% 6.83% 3.86% 3.67%
First Interstate Bank (30),(60) 2,681,972 33,616 246,331 2,681,972
of California, as (j) 20.97% 7.49% 11.41% 12.42%
Trustee
+ DLJ Venture Capital (7),(30) 37,605 680 37,605
Fund II, L.P. (j) (*) (*) (*)
++ DLJ Fund (7),(30) 37,605 680 37,605
Associates II (*) (*) (*)
+ Sprout Growth, L.P (7),(30) 773,908 13,456 773,908
(j) 6.41% 3.00% 3.58%
++ DLJ Growth (7),(30) 773,908 13,456 773,908
Associates 6.41% 3.00% 3.58%
+ Sprout Capital (7),(30) 1,170,111 19,480 27,389 1,170,111
VI, L.P. 9.61% 4.34% 1.27% 5.42%
+ Sprout Growth II, (7),(30) 635,652 198,699 635,652
L.P. 5.08% 9.20% 2.94%
+ DLJ Capital (7),(30) 2,681,972 33,616 246,311 2,681,972
Corporation 20.97% 7.49% 11.41% 12.42%
DLJ First ESC (7),(30) 1,969 633 1,969
Corporation (*) (*) (*)
</TABLE>
10
<PAGE> 12
<TABLE>
<CAPTION>
COMMON STOCK CONVERTIBLE PREFERRED STOCK
--------------------------- FULLY
FOOTNOTE (e) DILUTED
SHAREHOLDER REFERENCES OWNERSHIP SERIES C SERIES D OWNERSHIP
----------- ---------- --------- -------- -------- ---------
(a)(f) (b) (c) (d)
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Donaldson, Lufkin (7),(30) 101,512 32,597 101,512
& Jenrette (*) 1.51% (*)
Securities
Corporation
+ Donaldson, Lufkin (7),(30) 2,785,453 33,616 279,541 2,785,453
& Jenrette, Inc. 21.64% 7.49% 12.95% 12.90%
+ The Equitable (7),(30) 2,785,453 33,616 279,541 2,785,453
Companies 21.64% 7.49% 12.95% 12.90%
Incorporated
Equity-Linked (10),(19), 604,047 161,552 604,047
Investors, L.P. (g),(h) 4.83% 7.48% 2.80%
Equity-Linked II, (11),(19), 434,565 116,226 434,565
L.P. (g),(h) 3.51% 5.38% 2.01%
+ Rohit M. Desai (19),(56), 1,038,612 277,778 1,038,612
(g),(h) 8.07% 12.86% 4.81%
+ Desai Capital (19),(56), 1,038,612 277,778 1,038,612
Mgmt, Inc. (g),(h) 8.07% 12.86% 4.81%
Equus II (8),(37) 1,263,058 3,601 83,333 1,263,058
Incorporated 10.32% (*) 3.86% 5.85%
Equus Capital (8),(28) 338,249 1,300 338,249
Partners, L.P. 2.81% (*) 1.57%
+ Equus Capital (8),(28),(37), 338,249 1,300 338,249
Corporation (g),(h) 2.81% (*) 1.57%
+ Equus Capital (8),(28),(37), 338,249 1,300 338,249
Management (g),(h) 2.81% (*) 1.57%
Corporation
+ Equus Corporation (8),(28),(37), 338,249 1,300 338,249
International (g),(h) 2.81% (*) 1.57%
+ Douglass Trust (8),(28),(37), 338,249 650 338,249
FBO Brooke (g),(h) 2.81% (*) 1.57%
+ Douglass Trust (8),(28),(37), 338,249 650 338,249
FBO Preston (g),(h) 2.81% (*) 1.57%
Frontenac VI (18),(50) 1,186,466 55,556 388,889 1,186,466
Limited 9.20% 12.38% 18.01% 5.49%
Partnership
Frontenac Diversified (18),(29) 521,582 83,333 521,582
III Limited 4.18% 3.86% 2.41%
Partnership
+ Frontenac (18),(29),(50), 1,708,048 55,556 472,222 1,708,048
Company (g),(h) 12.78% 12.38% 21.87% 7.91%
+ Frontenac VI (18),(29) 521,582 83,333 521,582
Partners, L.P. 4.18% 3.86% 2.41%
</TABLE>
11
<PAGE> 13
<TABLE>
<CAPTION>
COMMON STOCK CONVERTIBLE PREFERRED STOCK
--------------------------- FULLY
FOOTNOTE (e) DILUTED
SHAREHOLDER REFERENCES OWNERSHIP SERIES C SERIES D OWNERSHIP
----------- ---------- --------- -------- -------- ---------
(a)(f) (b) (c) (d)
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Hancock Venture (15),(48) 678,455 20,874 111,111 678,455
Partners III, L.P. 5.49% 4.65% 5.15% 3.14%
John Hancock (15),(49) 355,443 111,111 355,443
Venture Capital 2.89% 5.15% 1.65%
Fund Limited
Partnership II
+ Back Bay Partners (47),(48), 1,033,898 20,874 222,222 1,033,898
V L.P. (49),(g),(h) 8.18% 4.65% 10.29% 4.79%
+ Back Bay Partners (47),(48),(49), 1,033,898 20,874 222,222 1,033,898
L.P. II (g),(h) 8.18% 4.65% 10.29% 4.79%
+ Hancock Venture (47), (48),(49), 1,033,898 20,874 222,222 1,033,898
Partners Inc. (g),(h) 8.18% 4.65% 10.29% 4.79%
+ John Hancock (47), (48), (49), 1,033,898 20,874 222,222 1,033,898
Subsidiaries, Inc. (g),(h) 8.18% 4.65% 10.29% 4.79%
+ John Hancock (47), (48),(49), 1,033,898 20,874 222,222 1,033,898
Mutual Life (g),(h) 8.18% 4.65% 10.29% 4.79%
Insurance Company
Olympus Private (6),(31) 2,077,292 103,773 83,334 2,077,292
Placement Fund, L.P 16.47% 23.12% 3.86% 9.62%
+ OGP Partners, L.P (6),(31), 2,077,292 103,773 83,334 2,077,292
(g),(h) 16.47% 23.12% 3.86% 9.62%
+ Robert S. Morris (6),(31), 2,077,292 103,773 83,334 2,077,292
(g),(h) 16.47% 23.12% 3.86% 9.62%
RFE Capital (14),(34),(40) 731,973 148,413 731,973
Partners, L.P. 5.80% 6.87% 3.39%
RFE Investment (14),(34),(40) 731,973 148,413 731,973
Partners IV, L.P. 5.80% 6.87% 3.39%
+ Norcon Associates (14),(34),(40) 731,973 148,413 731,973
(g),(h) 5.80% 6.87% 3.39%
+ RFE Associates (14),(34),(40), 731,973 148,413 731,973
IV, L.P. (g),(h) 5.80% 6.87% 3.39%
+ RFE Management (14),(34),(40), 731,973 148,413 731,973
Corp. (g),(h) 5.80% 6.87% 3.39%
+ Robert M. Williams (14),(34),(40), 741,973 148,413 741,973
(51),(h),(i) 5.88% 6.87% 3.44%
+ Howard C. Landis (14),(34),(40), 731,973 148,413 731,973
(g),(h) 5.80% 6.87% 3.39%
+ James A. Parsons (14),(34),(40), 731,973 148,413 731,973
(g),(h) 5.80% 6.87% 3.39%
+ Knute C. Albrecht (14),(34),(40), 734,953 148,413 734,953
(53),(h),(i) 5.82% 6.87% 3.40%
</TABLE>
12
<PAGE> 14
<TABLE>
<CAPTION>
COMMON STOCK CONVERTIBLE PREFERRED STOCK
--------------------------- FULLY
FOOTNOTE (e) DILUTED
SHAREHOLDER REFERENCES OWNERSHIP SERIES C SERIES D OWNERSHIP
----------- ---------- --------- -------- -------- ---------
(a)(f) (b) (c) (d)
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
+ Michael J. Foster (14),(34),(40), 733,726 148,413 733,726
(52),(h),(i) 5.81% 6.87% 3.40%
+ A. Dean Davis (14),(34),(40), 731,973 148,413 731,973
(g),(h) 5.80% 6.87% 3.39%
WPG Corporate (13),(39), 632,942 20,738 91,666 632,942
Development (g),(h) 5.14% 4.62% 4.25% 2.93%
Associates III, L.P.
+ WPG CDA (13),(42), 632,942 20,738 91,666 632,942
III, L.P. (g),(h) 5.14% 4.62% 4.25% 2.93%
WPG Corporate (54), (55), 134,270 4,399 19,445 134,270
Development (g),(h) 1.11% (*) (*) (*)
Associates III
(Overseas), L.P.
+ WPG CDA III (13),(43), 134,270 4,399 19,445 134,270
(Overseas), Ltd. (g),(h) 1.11% (*) (*) (*)
+ Philip Greer (13),(44), 767,212 25,137 111,111 767,212
(g),(h) 6.20% 5.60% 5.15% 3.55%
+ Wesley W. Lang, Jr. (13),(45), 770,228 25,284 111,111 770,228
(g),(h) 6.22% 5.63% 5.15% 3.57%
+ Steven N. (13),(46), 767,212 25,137 111,111 767,212
Hutchinson (g),(h) 6.20% 5.60% 5.15% 3.55%
Virginia (12),(33) 1,700,040 172,956 1,700,040
Retirement 13.45% 38.54% 7.87%
System
---------------------------------------------------------------------------------------------
</TABLE>
*) Less than 1% of the class.
+,++) Not held of record but may be deemed beneficially owned.
a) Total shares of Company Common Stock outstanding as of April 8, 1996 is
12,014,315.
b) 448,811 shares outstanding as of April 8, 1996, convertible into 897,622
shares of Company Common Stock on a 2 for 1 basis.
c) 2,159,365 shares outstanding as of April 8, 1996, convertible into
4,318,730 shares of Company Common Stock on a 2 for 1 basis.
d) On a fully diluted basis as of April 8, 1996, a total of 21,600,052
shares of Common Stock would be outstanding. This amount is composed of
(i) the 12,014,315 shares of Common Stock identified in footnote (a)
above; plus (ii) the following shares of Common Stock issuable upon the
exercise or conversion, as applicable, of the following securities of
the Company: (A) 80,000 shares underlying Champion stock subscriptions;
plus (B) 1,098,649 shares underlying Champion options; plus (C)
3,190,736 shares underlying Champion Warrants; plus (D) 5,216,352 shares
underlying Champion Preferred Stock.
13
<PAGE> 15
e) All direct and beneficial holders of each series of Preferred Stock,
Common Stock issuable upon conversion of Preferred Stock, Common Stock
issuable upon exercise of Warrants held by Preferred Stock holders, and
Common Stock issuable upon the exercise of Options are subject to the D
Stockholders Agreement.
f) With the exception of Messrs. White and Sage, all shares of Common Stock
beneficially owned are subject to the D Stockholders Agreement.
g) Shared voting power.
h) Shared investment power.
i) Includes shared voting and investment power for 731,973 shares.
j) Voting power only.
(1) Officer. Business address is 515 W. Greens Rd., Suite 800, Houston,
Texas 77067.
(2) Director.
(3) Mr. Conroy is a general partner of Olympus Private Placement Fund, L.P.
and disclaims beneficial ownership of the Company's securities owned by
that fund.
(4) Ms. Hickey is a general partner of Sprout Group, a division of DLJ
Capital Corp. and is a general partner of the general partner of Sprout
Growth, L.P., Sprout Growth II, L.P., Sprout Capital VI, L.P. and DLJ
Venture Capital Fund II, L.P., D.L.J. Securities Corporation, and D.L.J.
Capital Corporation and disclaims beneficial ownership of the Company's
securities beneficially owned by such funds. Ms. Hickey owns directly
in her individual capacity 444 shares of Series D Preferred Stock which
may be converted at any time at the holder's option into 888 shares of
Common Stock.
(5) Mr. Lehmann is president of Equus Capital Management Corporation, the
financial advisor and manager of Equus II Incorporated and Equus Capital
Partners, L.P. and disclaims beneficial ownership of the Company's
securities owned by Equus II Incorporated and Equus Capital Partners,
L.P. Mr. Lehmann owns directly 2,016 shares of the Common Stock.
(6) Metro Center, One Station Place, Stamford, CT 06902.
(7) 140 Broadway, 42nd floor, New York, NY 10005.
(8) 2929 Allen Parkway, Suite 2500, Houston, TX 77019.
(9) 5909-G Breckenridge Parkway, Tampa, FL 33610.
(10) Equity-Linked Investors, L.P. is the beneficial owner of 604,047 shares
of Common Stock through its direct ownership of (i) 106,463 shares of
Common Stock, (ii) 161,552 shares of Series D Preferred Stock which may
be converted at any time at the option of the holder into 323,104 shares
of Common Stock, and (iii) 174,480 shares of Common Stock that may be
acquired within 60 days upon the exercise of warrants.
(11) Equity-Linked Investors II, L.P. is the beneficial owner of 434,565
shares of Common Stock through its direct ownership of (i) 76,593 shares
of Common Stock, (ii) 116,226 shares of Series D Preferred Stock which
may be converted at any time at the option of the holder into 232,452
shares of Common Stock, and (iii) 125,520 shares of Common Stock that
may be acquired within 60 days upon the exercise of warrants.
(12) 1200 E. Main Street, Richmond, VA 23219.
14
<PAGE> 16
(13) One New York Plaza, 30th Floor, New York, NY 10004.
(14) 36 Grove Street, New Canaan, CT 06840.
(15) One Financial Center, 44th Floor, Boston, MA 02111.
(16) 222 West Adams Street, Chicago, IL 60606.
(17) Bahrain International Bank, E.C. is the beneficial owner of 445,443
shares of Common Stock through its direct ownership of (i) 73,221 shares
of Common Stock, (ii) 150,000 shares of Common Stock that may be
acquired within 60 days upon the exercise of Series D Warrants, and
(iii) 111,111 shares of Series D Preferred Stock, which may be converted
at any time at the option of the holder into 222,222 shares of Common
Stock.
(18) 135 S. LaSalle St., 38th Floor, Chicago, IL 60604.
(19) c/o Desai Capital Management, Inc., 540 Madison Avenue. - 36th Floor,
New York, NY 10022.
(20) c/o Dilmun Investments, Inc., Metro Center, One Station Place, Stamford,
CT 06902.
(21) 200 W. Madison Street, Chicago, IL 60606.
(22) Includes 220,374 shares that may be acquired by Mr. Miller within 60
days upon the exercise of stock options and warrants.
(23) Includes 387,333 shares that may be acquired by Mr. VanDevender within
60 days upon the exercise of stock options and subscriptions.
(24) Includes 89,852 shares that may be acquired by Mr. White within 60 days
upon the exercise of stock options; does not include 1,753 shares owned
by Mr. White's spouse, as to which shares he disclaims beneficial
ownership.
(25) Includes 30,000 shares that may be acquired by Mr. Ferris within 60 days
upon the exercise of stock options.
(26) Includes 38,225 shares that may be acquired by Mr. Doloresco within 60
days upon the exercise of stock options.
(27) Includes 1,147,281 shares that may be acquired by all directors and
officers as a group within 60 days upon the exercise of stock options,
warrants, or subscriptions.
(28) Equus Capital Partners, L.P. is the beneficial owner of 338,249 shares
of Common Stock through its direct ownership of (i) 333,755 shares of
Common Stock, (ii) 1,894 shares of Common Stock that may be acquired
within 60 days upon the exercise of warrants, (iii) 1,300 shares of
Series C Preferred Stock which may be converted at any time at the
option of the holder into 2,600 shares of Common Stock. Equus Capital
Corporation, Equus Capital Management Corporation, Equus Corporation
International, Douglass Trust FBO Brooke and Douglass Trust FBO Preston
may be deemed to beneficially own the shares of Common Stock
beneficially owned by Equus Capital Partners, L.P. By reason of his
status as President of Equus Capital Corporation, which is the managing
general partner of Equus Capital Partners, L.P., Mr. Lehmann may be
deemed to be the beneficial owner of the 338,249 shares of Common Stock
held by Equus Capital Partners, L.P. In addition, Mr. Lehmann holds
2,016 shares of Common Stock which he beneficially owns in his own
capacity. Accordingly, Mr. Lehmann may be deemed to be the beneficial
owner of 340,265 shares of Common Stock in the aggregate. Mr. Lehmann
disclaims beneficial ownership of the 338,249 shares of Common Stock.
(29) Frontenac Diversified III Limited Partnership is the beneficial owner of
521,582 shares of Common Stock through its direct ownership of (i)
54,916 shares of Common Stock, (ii) 300,000 shares of Common Stock that
15
<PAGE> 17
may be acquired within 60 days upon the exercise of Warrants, and (iii)
83,333 shares of Series D Preferred Stock which may be converted at any
time at the option of the holder into 166,666 shares of Common Stock.
Frontenac Company and Frontenac VI Partners, L.P. may be deemed to
beneficially own the shares of Common Stock beneficially owned by
Frontenac Diversified III Limited Partnership.
(30) DLJ Venture Capital Fund II, L.P. ("DLJ II") may be deemed to be the
beneficial owner of the following securities held by First Interstate
Bank of California as trustee: 34,606 shares of Common Stock, 1,360
shares of Common Stock issuable upon conversion or exercise of the 680
shares of Series C Preferred Stock and warrants to purchase 1,639 shares
of Common Stock. Accordingly, DLJ II may be deemed to beneficially own
an aggregate of 37,605 shares of Common Stock (the "DLJ II Shares").
DLJ Fund Associates II ("Associates II"), as the general partner of DLJ
II, may be deemed to beneficially own indirectly the DLJ II Shares.
Sprout Growth, L.P. ("Growth") may be deemed to be the beneficial owner
of the following securities held by First Interstate Bank of California,
trustee: 714,631 shares of Common Stock, the 26,912 shares of Common
Stock issuable upon conversion or exercise of the 13,456 shares of
Series C Preferred Stock and warrants to purchase 32,365 shares of
Common Stock. Accordingly, Growth may be deemed to beneficially own an
aggregate of 773,908 shares of Common Stock (the "Growth Shares").
DLJ Growth Associates ("Associates"), as a general partner of Growth,
may be deemed to beneficially own indirectly the Growth shares.
Sprout Capital VI, L.P. ("Sprout VI") may be deemed to be the beneficial
owner of the following securities held by First Interstate Bank of
California, trustee: 1,014,727 shares of Common Stock, the 155,384
shares of Common Stock issuable upon the conversion or exercise of the
19,480 and 27,389 shares of Series C and Series D Preferred Stock,
respectively, and warrants to purchase 61,646 shares of Common Stock.
Accordingly, Sprout VI may be deemed to beneficially own an aggregate of
1,170,111 shares of Common Stock (the "Sprout VI Shares").
Sprout Growth II, L.P. ("Growth II") may be deemed to be the beneficial
owner of the following securities held by First Interstate Bank of
California, trustee: 130,944 shares of Common Stock, the 397,398
shares of Common Stock issuable upon the conversion or exercise of the
198,699 shares of Series D Preferred Stock and warrants to purchase
107,310 shares of Common Stock directly owned by it. Accordingly,
Growth II may be deemed to beneficially own an aggregate of 635,652
shares of Common Stock (the "Growth II Shares").
DLJ Capital Corporation ("DLJCC") may be deemed to be the beneficial
owner of the following securities held by First Interstate Bank of
California, trustee: 13,327 shares of Common Stock, the 40,446 shares
of Common Stock issuable upon the conversion or exercise of the 20,223
shares of Series D Preferred Stock and warrants to purchase 10,920
shares of Common Stock. DLJCC, because of its relationships with DLJ II
and Associates II, and Growth and Associates, and as the managing
general partner of each Sprout VI and Growth II, also may be deemed to
beneficially own indirectly the DLJ II Shares, the Growth Shares, the
Sprout VI Shares and the Growth II Shares, for an aggregate of 2,681,969
shares of Common Stock (the "DLJCC Shares").
DLJ First ESC L.L.C. ("ESC") may be deemed to be the beneficial owner of
1,969 Common Shares through it's direct ownership of (i) 364 shares of
Common Stock, (ii) the 1,605 shares of Common Stock (the "ESC Shares")
issuable upon the conversion or exercise of the 633 shares of Series D
Preferred Stock, and warrants to purchase 339 shares of Common Stock.
DLJ LBO Plans Management Corporation ("LBO"), as the manager of ESC, may
be deemed to beneficially own indirectly the ESC shares.
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJSC") may be
deemed to be the beneficial owner of 101,512 Common shares through it's
direct ownership of (i) 18,747 shares of Common Stock, (ii) the 82,765
16
<PAGE> 18
shares of Common Stock (the "DLJSC Shares") issuable upon the
conversion or exercise of the 32,597 shares of Series D Preferred Stock,
and warrants to purchase 17,571 shares of Common Stock.
As the sole stockholder of DLJCC and DLJSC, Donaldson, Lufkin &
Jenrette, Inc. ("DLJ") may be deemed to beneficially own indirectly the
DLJCC Shares and the DLJSC Shares. In addition, as the sole stockholder
of LBO, DLJ may be deemed to beneficially own indirectly the shares that
are beneficially owned indirectly by LBO. Because of The Equitable
Companies Incorporated ("Equitable")'s ownership of DLJ, Equitable may
be deemed to beneficially own indirectly the DLJCC Shares, the DLJSC
Shares and the shares attributed to LBO that may be deemed to be
beneficially owned by DLJ.
(31) Olympus Private Placement Fund, L.P. is the beneficial owner of
2,077,292 shares of Common Stock through its direct ownership of (i)
1,481,294 shares of Common Stock, (ii) 221,784 shares of Common Stock
that may be acquired within 60 days upon the exercise of Warrants, (iii)
103,773 shares of Series C Preferred Stock, which may be converted at
any time at the option of the holder into 207,546 shares of Common
Stock, and (iv) 83,334 shares of Series D Preferred Stock, which may be
converted at any time at the option of the holder into 166,668 shares of
Common Stock. OGP Partners, L.P., James A. Conroy, and Robert S. Morris
may be deemed to beneficially own the shares of Common Stock
beneficially owned by Olympus Private Placement Fund, L.P.
(32) Baker Fentress & Company is the beneficial owner of 535,443 shares of
Common Stock through its direct ownership of (i) 73,221 shares of Common
Stock, (ii) 240,000 shares of Common Stock that may be acquired within
60 days upon the exercise of stock warrants, and (iii) 111,111 shares of
Series D Preferred Stock, which may be converted into 222,222 shares of
Common Stock.
(33) Virginia Retirement System is the beneficial owner of 1,700,040 shares
of Common Stock through its direct ownership of 1,077,128 shares of
Common Stock, (ii) 172,956 shares of Series C Preferred Stock, which may
be converted at any time at the option of the holder into 345,912 shares
of Common Stock, and (iii) 277,000 shares of Common Stock that may be
acquired within 60 days upon the exercise of warrants.
(34) RFE Capital Partners, L.P. is the beneficial owner of 237,782 shares of
Common Stock through its direct ownership of (i) 40,150 shares of Common
Stock, and (ii) 197,632 shares of Common Stock that may be acquired
within 60 days upon the exercise of Warrants. Norcon Associates, RFE
Investment Partners IV, L.P., RFE Associates IV, L.P., RFE Management
Corp., Robert M. Williams, Howard C. Landis, James A. Parsons, Knute C.
Albrecht, A. Dean Davis and Michael J. Foster may be deemed to
beneficially own the shares of Common Stock beneficially owned by RFE
Capital Partners, L.P.
(35) William Blair Venture Partners III Limited Partnership is the beneficial
owner of 793,644 shares of Common Stock through its direct ownership of
(i) 477,548 shares of Common Stock, (ii) 88,078 shares of Common Stock
that may be acquired within 60 days upon the exercise of warrants, (iii)
30,675 shares of Series C Preferred Stock which may be converted at any
time at the option of the holder into 61,350 shares of Common Stock, and
(iv) 83,334 shares of Series D Preferred Stock which may be converted at
any time at the option of the holder into 166,668 shares of Common
Stock.
(36) Does not include 12,675 shares owned by Mr. Sage's wife, as to which
shares he disclaims beneficial ownership.
(37) Equus II Incorporated is the beneficial owner of 1,263,058 shares of
Common Stock through its direct ownership of (i) 1,038,944 shares of
Common Stock, (ii) 50,246 shares of Common Stock that may be acquired
within 60 days upon the exercise of warrants, (iii) 3,601 shares of
Series C Preferred Stock which may be converted at any time at the
option of the holder into 7,202 shares of Common Stock, and (iv) 83,333
shares of Series D Preferred Stock which may be converted at any time at
the option of the holder into 166,666 shares of Common Stock.
(38) 1670 Tyler Green Trail, Smyrna, GA 30080.
(39) WPG Corporate Development Associates III, L.P. is the beneficial owner
of 632,942 shares of Common Stock through its direct ownership of (i)
331,132 shares of Common Stock, (ii) 77,002 shares of Common Stock that
17
<PAGE> 19
may be acquired within 60 days upon the exercise of Warrants, (iii)
20,738 shares of Series C Preferred Stock, which may be converted at any
time at the option of the holder into 41,476 shares of Common Stock, and
(iv) 91,666 shares of Series D Preferred Stock, which may be converted
at any time at the option of the holder into 183,332 shares of Common
Stock.
(40) RFE Investment Partners IV, L.P. is the beneficial owner of 494,191
shares of Common Stock through its direct ownership of (i) 77,275 shares
of Common Stock, (ii) 120,090 shares of Common Stock that may be
acquired within 60 days upon the exercise of Warrants, and (iii) 148,413
shares of Series D Preferred Stock, which may be converted at any time
at the option of the holder into 296,826 shares of Common Stock. RFE
Capital Partners, L.P., Norcon Associates, RFE Associates IV, L.P. RFE
Management Corp., Robert M. Williams, Howard C. Landis, James A.
Parsons, Knute C. Albrecht, Michael J. Foster, and A. Dean Davis may be
deemed to beneficially own the shares of Common Stock beneficially owned
by RFE Investment Partners IV, L.P.
(41) Includes 30,000 shares that may be acquired by Mr. Spencer within 60
days upon the exercise of stock options.
(42) WPG CDA III, L.P., as the sole general partner of WPG Corporate
Development Associates III, L.P., may be deemed to own beneficially the
632,942 shares held by WPG Corporate Development Associates III, L.P.
(43) WPG CDA III (Overseas), Ltd. as the sole investment advisor of WPG
Corporate Development Associates III (Overseas), Ltd., may be deemed to
own beneficially the 134,270 shares owned by WPG Corporate Development
Associates III (Overseas), Ltd. WPG CDA III (Overseas), Ltd. disclaims
beneficial ownership of all such shares.
(44) By reason of his status as a managing general partner of WPG CDA III,
L.P., which is the sole general partner of WPG Corporate Development
Associates III, L.P., Mr. Greer may be deemed to be the beneficial owner
of the 632,942 shares held by WPG Corporate Development Associates III,
L.P. By reason of his status as a managing general partner of WPG CDA
III (Overseas), L.P., Mr. Greer may also be deemed to be the beneficial
owner of the 134,270 shares held by WPG Corporate Development Associates
III (Overseas), L.P. Accordingly, Mr. Greer may be deemed to be the
beneficial owner of 767,212 shares. Mr. Greer disclaims beneficial
ownership of all shares beneficially owned by WPG Corporate Development
Associates III, L.P. and WPG Corporate Development Associates III
(Overseas), L.P., except to the extent of his indirect beneficial
interest as a managing general partner of WPG CDA III, L.P. in shares
held by WPG Corporate Development Associates III, L.P.
(45) By reason of his status as a managing partner of WPG CDA III, L.P.,
which is the sole general partner of WPG Corporate Development
Associates III, L.P., Mr. Lang may be deemed to be the beneficial owner
of the 632,942 shares held by WPG Corporate Development Associates, L.P.
By reason of his status as a managing general partner of WPG CDA III
(Overseas), L.P., Mr. Greer may also be deemed to be the beneficial
owner of the 134,270 shares held by WPG Corporate Development Associates
III (Overseas), L.P. In addition, Mr. Lang is the beneficial owner in
his individual capacity of 3,016 shares through his direct ownership of
(i) 2,506 shares of Common Stock, (ii) 216 shares of Common Stock that
may be acquired within 60 days upon the exercise of warrants, and (iii)
147 shares of Series C Preferred Stock, which may be converted at any
time at the option of the holder into 294 shares of Common Stock and has
the sole power to vote or direct the vote of and the sole power to
dispose or direct the disposition of the 3,016 shares. Accordingly, Mr.
Lang may be deemed to be the beneficial owner of 770,228 shares in the
aggregate. Mr. Lang disclaims beneficial ownership of all shares
beneficially owned by WPG Corporate Development Associates III, L.P. and
WPG Corporate Development Associates III (Overseas), L.P., except to the
extent of his indirect beneficial interest as a managing general partner
of WPG CDA III, L.P. in shares held by WPG Corporate Development
Associates III, L.P.
(46) By reason of his status as a managing partner of WPG CDA III, L.P.,
which is the sole general partner of WPG Corporate Development
Associates III, L.P., Mr. Hutchinson may be deemed to be the beneficial
owner of the 632,942 shares held by WPG Corporate Development Associates
III, L.P. By reason of his status as a managing general partner of WPG
CDA III (Overseas), L.P., Mr. Hutchinson may also be deemed to be the
beneficial owner of the 134,270 shares held by WPG Corporate Development
Associates III (Overseas), L.P. Accordingly, Mr. Hutchinson may be
deemed to be the beneficial owner of 767,212 shares. Mr. Hutchinson
disclaims beneficial
18
<PAGE> 20
ownership of all shares beneficially owned by WPG Corporate Development
Associates III, L.P. and WPG Corporate Development Associates III
(Overseas), L.P., except to the extent of his indirect beneficial
interest as a managing general partner of WPG CDA III, L.P. in shares
held by WPG Corporate Development Associates III, L.P.
(47) John Hancock Place, Boston, Massachusetts 02117.
(48) Hancock Venture Partners III, L.P. is the beneficial owner of 678,455
shares of Common Stock through its direct ownership of (i) 328,637
shares of Common Stock, (ii) 85,848 shares of Common Stock that may be
acquired within 60 days upon the exercise of Warrants, (iii) 20,874
shares of Series C Preferred Stock, which may be converted at any time
at the option of the holder into 41,748 shares of Common Stock, and (iv)
111,111 shares of Series D Preferred Stock, which may be converted at
any time at the option of the holder into 222,222 shares of Common Stock
of the outstanding shares of Common Stock. Back Bay Partners V, L.P.,
Back Bay Partners, Hancock Venture Partners Inc., John Hancock
Subsidiaries, Inc., and John Hancock Mutual Life Insurance Company may
be deemed to beneficially own the shares of Common Stock beneficially
held by Hancock Venture Partners III, L.P.
(49) John Hancock Venture Capital Fund Limited Partnership II is the
beneficial owner of 355,443 shares of Common Stock through its direct
ownership of (i) 73,221 shares, (ii) 60,000 shares of Common Stock that
may be acquired within 60 days upon the exercise of Warrants and (iii)
111,111 shares of Series D Preferred Stock, which may be converted at
any time at the option of the holder into 222,222 shares of Common
Stock. Back Bay Partners V, L.P., Back Bay Partners L.P. II, Hancock
Venture Partners Inc., John Hancock Subsidiaries, Inc., and John Hancock
Mutual Life Insurance Company may be deemed to beneficially own the
shares of Common Stock beneficially held by John Hancock Venture Capital
Fund Limited Partnership II.
(50) Frontenac VI Limited Partnership is the beneficial owner of 1,186,466
shares of Common Stock through its direct ownership of (i) 297,576
shares of Common Stock, (ii) 55,556 shares of Series C Preferred Stock,
which may be converted at any time at the option of the holder into
111,112 shares of Common Stock and (iii) 388,889 shares of Series D
Preferred Stock, which may be converted at any time at the option of the
holder into 777,778 shares of Common Stock. Frontenac Company may be
deemed to beneficially own the shares of Common Stock beneficially owned
by Frontenac VI Limited Partnership.
(51) Mr. Williams may be deemed the beneficial owner of 741,973 shares of
Common Stock which includes his direct ownership of 10,000 shares of
Common Stock.
(52) Mr. Foster may be deemed the beneficial owner of 733,726 shares of
Common Stock which includes his direct ownership of 1,753 shares of
Common Stock.
(53) Mr. Albrecht may be deemed the beneficial owner of 734,953 shares of
Common Stock which includes his direct ownership of 2,980 shares of
Common Stock.
(54) c/o Walker & Company, Caledonian House, Grand Cayman, Cayman Islands,
British West Indies.
(55) WPG Corporate Development Associates III (Overseas), Ltd., is the
beneficial owner of 134,270 shares of Common Stock through its direct
ownership of (i) 70,240 shares of Common Stock, (ii)16,342 shares of
Common Stock that may be acquired within 60 days upon the exercise of
Warrants, (iii) 4,399 shares of Series C Preferred Stock, which may be
converted at any time at the option of the holder into 8,798 shares of
Common Stock, and (iv) 19,445 shares of Series D Preferred Stock, which
may be converted any time at the option of the holder into 38,890 shares
of Common Stock.
(56) Each of Desai Capital Management, Inc. and Rohit M. Desai may be deemed
to be the beneficial owner of the entire 1,038,612 shares of Common
Stock held by Equity-Linked Investors, L.P. and Equity-Linked Investors
II, L.P.
19
<PAGE> 21
(57) Includes 221,930 shares that may be acquired by Mr. Patterson within 60
days upon the exercise of stock options and warrants.
(58) Includes 6,666 shares that may be acquired by Mr. Wilkey within 60 days
upon the exercise of stock options.
(59) 610 S.W. 128th Street, Miami, FL 33156.
(60) 707 Wilshire Boulevard, W-11-2, Los Angeles, CA 90017. Trustee under a
ten year voting trust agreement dated August 31, 1995, granting it sole
voting power of the Company securities it holds on behalf of Sprout
Growth, L.P., Sprout Capital VI, L.P., DLJ Venture Capital Fund II,
L.P., Sprout Growth II, L.P., and DLJ Capital Corporation.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Effective April 12, 1996, the Company executed a definitive Agreement and Plan
of Merger ( Merger Agreement") with Paracelsus Healthcare Corporation, a
privately held California corporation ( Paracelsus") and PC Merger Sub., Inc.,
a newly formed Paracelsus subsidiary. The Merger Agreement provides for, among
other things, the merger of PC Merger Sub., Inc. with and into the Company (the
Merger"). Each share of the Company's Common Stock will convert into one share
of Paracelsus Common Stock and each share of the Company's Preferred Stock will
convert into two shares of Paracelsus Common Stock. The Merger is subject to a
number of customary conditions including filings with the Securities and
Exchange Commission, approval of the stockholders of the Company and
Paracelsus, and antitrust filings. Charles R. Miller, the Company's chairman
of the board, president and chief executive officer, James G. VanDevender, the
Company's executive vice president and chief financial officer, and Ronald R.
Patterson, the Company's executive vice president and chief operating officer,
will become a director and the president and chief operating officer, a
director and executive vice president and chief financial officer, and
executive vice president of healthcare operations, respectively, of Paracelsus.
The Merger Agreement provides that employment agreements between these officers
and Paracelsus will be entered into prior to the effective time of the Merger.
All of the Company's outstanding stock options and Common Stock subscriptions
will be assumed by Paracelsus.
Effective April 12, 1996, the Company and certain holders of its Series D Notes
and Series E Notes and holders of its Series C Preferred Stock and Series D
Preferred Stock entered into an Agreement in Contemplation of Merger, that
among other things provided (i) the parties thereto holding shares of Series C
Preferred and Series D Preferred agreed to vote their Preferred Shares for the
Merger, (ii) the holders of the Series D Notes agreed among other things (a) to
waive any rights to cause the Company to purchase from such holders the Series
D Notes in the event of a change in control caused by the Merger and (b)
surrender their Series D Notes for prepayment at a premium depending upon the
year of prepayment, and (iii) the holder of the Series E Notes agreed among
other things to (x) to waive any rights to cause the Company to purchase from
such holders the Series E Notes in the event of a change in control caused by
the Merger and (y) to surrender their Series E Notes for prepayment at a
premium depending upon the year of such prepayment and upon whether warrants to
purchase Company Common Stock are surrendered in connection with such
prepayment.
The Company and holders of the Series C and Series D Preferred Stock and the
outstanding warrants have rights to both require and participate in the filing
of registration statements by the Company with the Securities and Exchange
Commission.
Management Prescriptives, Inc., a company majority owned by David S. Spencer,
a director of the Company, has provided specialized consulting services to
certain of the Company's hospitals. During 1994 and 1995, this company
received $283,000 and $421,000, respectively.
Janet A. Hickey, a director of the Company, has been employed by and is
currently a general partner of the Sprout Group, the venture capital affiliate
of Donaldson, Lufkin & Jenrette, a major investment banking firm that has
received compensation for acting as an underwriter for the Company during 1995.
20
<PAGE> 22
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Dated: April 26, 1996 Champion Healthcare Corporation
-------------- (Registrant)
By: /s/ James G. VanDevender
-----------------------------------
James G. VanDevender
Executive Vice President, Chief
Financial Officer and Director
(Principal Financial Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
/s/ Charles R. Miller President, Chief Executive Officer, March 26, 1996
- ------------------------ Chairman of the Board of Directors --------------
Charles R. Miller
/s/ James G. VanDevender Executive Vice President, Chief March 26, 1996
- ------------------------ Financial Officer, Director (Principal --------------
James G. VanDevender Financial Officer)
/s/ Robert M. Starling Vice President and Controller March 26, 1996
- ------------------------ (Principal Accounting Officer) --------------
Robert M. Starling
/s/ James A. Conroy Director March 26, 1996
- ------------------------ --------------
James A. Conroy
/s/ Manuel M. Ferris Director March 26, 1996
- ------------------------ --------------
Manuel M. Ferris
/s/ Janet A. Hickey Director March 26, 1996
- ------------------------ --------------
Janet A. Hickey
/s/ Nolan Lehmann Director March 26, 1996
- ------------------------ --------------
Nolan Lehmann
/s/ Richard D. Sage Director March 26, 1996
- ------------------------ --------------
Richard D. Sage
/s/ David S. Spencer Director March 26, 1996
- ------------------------ --------------
David S. Spencer
/s/ William G. White Director March 26, 1996
- ------------------------ --------------
William G. White
</TABLE>
21
